Keep in mind - the key to recovery is the consumer. The consumer has to be able and wiling to spend more than he is currently spending if the economy is to recover, and folks, the consumer ain't ready or willing. Nor is he likely to be any time soon. Here is a report from The New York Times.
The broader economy may be testing the bottom, but for American consumers, there appears to be no end yet in sight for falling wages and higher living expenses.The consumer is getting no additional money to spend, and he doesn't feel secure so he is going to save any of what he gets. The total available consumption spending is still shrinking and there is no hint of suggestion that it is going to turn around soon.
That was the picture painted Tuesday by the government’s monthly report on personal incomes and consumer spending. While consumers spent more in June, they did so because prices of food and energy were rising, and not because they were ready to spend freely again.
Personal incomes sagged as employers continued to cut wages and reduce working hours. And the personal saving rate, which had been rising, dropped sharply from a month earlier as one-time transfer payments from the government stopped arriving in people’s bank accounts.
“Consumers are not spending any more money,” Steven Ricchiuto, chief economist at Mizuho Securities, said. “They’re still consolidating.” Personal income fell back 1.3 percent in June, just a month after a one-time $250 payment to Social Security recipients lifted it by the same amount. And in a sign of continuing troubles for American workers, private wages and salaries fell for a fourth month, slipping a seasonally adjusted $28.6 billion after a $11.3 billion drop a month earlier.
Private wages and salaries have fallen for each of the last 10 months as businesses trimmed costs by freezing pay, imposing salary cuts and reducing the work week. Personal income has dropped by a seasonally adjusted $372 billion since September.
“Wage and hour cuts are big right now,” Adam York, an economist at Wells Fargo, said. “The economy remains fairly weak, and the labor market even weaker. We’ve lost 6 million jobs, and unemployment is rapidly heading toward 10 percent. There’s just not a lot of wage pressure out there right now.”
The Commerce Department’s report showed that while consumer spending was no longer falling precipitously, shoppers were still extremely cautious with their money. Personal spending rose by a seasonally adjusted 0.4 percent in June, but factoring in price changes, real consumer spending slipped 0.1 percent.
The best that can be said is that things aren't as bad ad they were slated to be if the government hadn't conducted the massive stimulus spending.
There is no suggestion that these conditions will change soon, either. Certainly not in 2009, and how soon after that is still unknown.